Most parents struggle to teach their children about money and register concern over how their kids spend beyond their means on things that are unnecessary in their everyday lives.
Their kids want the latest iPhones, or iPads, or i-this, or i-that. They are incapable of managing the money their parents give them or they simply don’t have good money habits.
Unfortunately, some children don’t appreciate the value of the ringgit as money comes too easy for them. These are the common challenges that parents face in today’s environment.
The financial health of every individual is paramount in the quest to attain a good quality of life.
Too often, most young adults only start looking at their financial health once they’ve started working. Unfortunately this might be a little too late because bad habits were already inculcated when young.
A group called Money-Savvy Generation conducted a survey about children and their financial health and here are the results:• Five out of six children will be left behind in the global economy.
• Four out of six will never be able to manage a household budget.
• Three out of six will not know how to save for retirement.
• Two out of six will not know how to balance a cheque book.
• One out of six is likely to declare bankruptcy during their lifetime.
This might sound unbelievable, but the results of their survey are relevant in today’s society.
Why financial education is important
It’s important because it is becoming increasingly tough for the next generation to live in the current economy.
In this country, for example, Malaysians are all aware that the cost of living is going to go up this year.
In the past, one job was enough for the entire family to live on wherein the mother can be a homemaker and look after the children. Today, both parents have to work.
Yet, despite both parents working, families are only saving enough to make ends meet or, sometimes, merely surviving.
If you think that your children growing up and attaining their professional degrees will be enough for them to do well, you’re sadly mistaken.
Every day, the newspapers report the consequences of financial illiteracy. Household debt stands at 83% against GDP, making Malaysia the highest in Southeast Asia.
Society has to wake up to the fact that too much money is being owed to other people.
Because of financial illiteracy, people are too easily swayed by advertisements and impulsively make purchases that are beyond their means.
For example, a young man recently brought a pair of slippers. He is not bad with money. He’s not someone who spends money frivolously and he’s quite a good saver, but recently he bought a pair of slippers that cost RM200. Even he felt it was too expensive.
When asked, “You bought a pair of slippers for RM200? My shoes are only RM200. You spent RM200 on slippers.” He said, “Well, all my friends are wearing the same slippers.”
Children are constantly exposed to peer pressure. When their friends want to do something, they too want to do the same thing. People are even willing to spend RM380 million on a toy set. That’s simply insane!
So, one of the consequences of financial illiteracy is your children becoming extravagant with their spending because of societal pressure. As a result, they grow up accumulating a massive amount of debt.
This article first appeared in kclau.com
KC Lau’s first book Top Money Tips for Malaysians has sold thousands of copies. He launched the first online personal finance course specifically designed for Malaysians, entitled the Money Automation System. He also co-founded many other online financial courses including the Bursa Method, Property Method, Founder Method and REIT Method.